Can an armed conflict erupt in the Strait of Hormuz? How can it come about? How wide can it develop? For how long can it disrupt commercial traffic? I formulate four different strategic scenarios that contemplate these questions, though not precisely answering them.

Scenario I – Direct engagement from Iran on commercial vessels at the Strait.

In this scenario Iran would employ one of its many sea borne weapons to either attack or block the way of oil tankers leaving the Persian Gulf. This could be done by torpedoing the vessel or targeting it with a small missile; alternatively Iran could simply deploy some if its navy close to the commercial routes and emit a warning that every ship trying to cross the Strait would be sunk. The effect on oil prices would be immediate, in the second case even without firing a single a shot. It would be a sheer powerful defiance by Iran, aiming to guarantee that economic sanctions affect every major player in the region.

This would certainly force an intervention by NATO forces in the region, a scenario that could develop in two different ways. If NATO opts simply for defending the navigation across the Strait then the multitude of weapons Iran has would likely guarantee a long period of tension with random attacks on both commercial and military vessels in the Strait. The economic consequences for the Asian importers would be dire and a worldwide recession would ensue. Otherwise NATO could opt for a large scale operation to bring down Iran's military capacities around the Strait. This would then resemble Scenarios II and III, whose outcome is not clear, especially in terms of conflict time span.

I find this scenario the least likely of all. This would not only be an attack on oil importers, it would be above all be an attack on the major oil exporters around the Gulf. Iran has little interest in getting at odds with its neighbours, especially in the case of the UAE, with whom it maintains a close economic relationship. Apart from the Emirates, Iran shares maritime oil and gas resources with Qatar, Saudi Arabia and Kuwait, that in some cases are already under joint development. And of course there is Iraq, with which Iran shares a long border that was the stage for a long and deadly conflict in the 1980s; certainly it is in no one's interest to revive such tensions. A bold action like the one proposed in this scenario would require a totally desperate internal situation in Iran, and even so, Scenario II would be more plausible.

Scenario II – Direct engagement from Iran on military vessels in the Persian Gulf.

Instead of attacking or menacing commercial vessels, Iran could opt for an engagement on NATO's naval forces in the Persian Gulf. The effect on oil prices would be about the same as in scenario I, but without the sense of a direct attack on Iran's neighbours. This sort of engagement could come about as a consequence of some minor incident, such as a NATO vessel entering Iran's waters or an Iranian aircraft or ship being hit. An incident like this can easily be faked if needed, but unfortunately, the growing tension and the bellicose discourse around the Strait can also provide for a real episode where at least one of the players feels compelled to larger actions.

Invariably this scenario would lead to a large scale conflict, not only in the Strait but extending at least to Iran's long southern coastline. The outcome of such hypothetical conflict is very elusive, but one thing is certain, given Iran's profuse weaponry and extensive territory it can hardly be swift. Many uncertainties remain in surmising the correct power balance in the Persian Gulf at this moment. Is Iran's wide range of anti-ship missiles and torpedoes capable of imposing damages on NATO's fleet? Not only is the effectiveness of weapons like the Russian Moskit unknown, but the outcome of a wide simultaneous engagement with a multitude of anti-ship weapons on NATO's vessels is also not clear. In the worst case NATO's fleet may be forced back to its naval bases in Bahrain and the UAE and operate solely from the Gulf of Oman. If something like this would ever come to happen, oil shipments across the Strait would be certainly affected for a long period of time, and the impact on the world economy would be devastating.

A second question is Iran's capabilities in air defence. Can NATO project its air prowess as it did in the Balkans, Iraq or Libya? It will certainly face a sort of opposition it never did before, both in the number and in the technology of anti-air missiles retained today by Iran. If adding to these Iran effectively possesses relevant numbers of modern day jet fighters, then air dominance over Iran becomes completely uncertain. Nevertheless, NATO retains technology that Iran has no known counter measures against, especially state of the art stealth aircraft built in the US. Hence it is certain that in case of such a large scale military conflict NATO can continuously target military objectives in Iran, eventually eroding its operational capabilities. The question is how long such conflict can last and menace oil shipments across the Strait. Stabilization of the region could require a sort of military commitment NATO has never been forced into before. How could this play out with a ramping oil price conflated with the ongoing economic environment is hard to envision.

Though I find this scenario more plausible than scenario I, it still remains quite remote. Iran's government still has other options to explore before finding itself in a desperate situation where military action becomes attractive.

Scenario III – Military engagement by NATO on Iran

In such a scenario NATO would opt for a preemptive attack on Iran, both targeting Iran's nuclear facilities and military assets around the Strait. This scenario has been spun both in Israel and the US, especially since Iran has threatened to close the Strait in retaliation against the hardening of economic sanctions. While it has been largely dismissed by the wider political spectrum, it should be noted that from a strict military perspective this is the conflict scenario that could be less costly for NATO members. Taking the initiative, it could guarantee the shortest disruption possible to the flow of oil through the Strait. Most of this oil (85%) feeds Asia, NATO members are already on course to phase out Iranian oil imports and the strategic oil reserves coordinated by the IEA would provide the means to accommodate the economic impact for some time.

The first problem with this strategy is if NATO is not able to promptly achieve air superiority over Iran, in such case not being able to tame the country's menace to the oil flow in the Strait in a timely manner. As stated before, this largely depends on the numbers of modern aircraft and air defences Iran effectively possesses. If a relevant resistance to NATO's air power is achieved then a situation similar to the worst case of scenario II could develop.

Finally, in the case a wider military conflict develops between NATO and Iran a much bigger question arises on how other military powers may react. In recent months military officials from both China and Russia have made it clear they wouldn't remain passive in the face of such conflict. This discourse may be an important deterrent to this scenario or any wider conflict in consequence of scenarios I or II.

With the information I could gather, it seems to me this option is risky (or at least uncertain) enough for NATO not to take at this stage. It should remain a remote hypothesis, at least as long as real evidence of a military nuclear programme in Iran doesn't come about. Finally I should point out that considering Iran's vast arsenal, a lone attack by Israel seems highly unlikely, at least with conventional weapons.

Scenario IV – No military action

At this stage the most likely scenario is for no bellicose action to take place. This scenario has several requirements, but all achievable. In the first place the Iranian government has to stabilize its currency, so far this has been achieved by cracking down on the independent trade of foreign currency and gold, first by disabling the electronic means to do so and then by outlawing such activities. In this regard more will have to happen, as the government has to somehow re-establish public trust on the internal economic system. And then Iran must find ways to continue selling its oil, either by finding alternative importers, like Korea, that are not complying with US sanctions, or by “smuggling” oil to neighboring countries, that then sell it as their own. The fact that about 30% of Iran's foreign trade takes place in the parallel economy can be an important start for this alternative trade. It is unclear what role the joint oil developments in the Persian Gulf may play, but they can provide a further workaround for Iran to maintain its oil revenues.

Iran's economy will be undoubtedly impacted, but has been seen in section I it is rather self-sufficient, especially in agriculture. Some consumer goods may become difficult to get, as it is already happening with consumer electronics, but Iran should be able to provide the basic needs of its folk in the short term and once again seek alternative sources for its imports. It is unlikely that a sort of Persian Spring comes to unfold. That the political system allows for public will to be expressed by voting and direct opposition to the theocratic structure has been a fable, squashed by fierce control of the media and internet. Thus, the political situation may remain relatively intact, facilitating a pure economic strategy out of the crisis. If this scenario unfolds, it could simply result in a regionalization of Iran's foreign trade, geographically constraining commercial exchanges to the Middle and Far East. Naturally China can play a major role in this process, while some officials have been suggesting a compliance with the US line, it is in China's interest to keep Iran somewhat inside its sphere of influence.

The only issue with this scenario is that it doesn't guarantee to the US and NATO that Iran's nuclear programme is halted. On the contrary, the technical advances of Iran's nuclear technology keep on going, as recently announced by President Ahmadinejad. Though no evidence exists that this programme has military ambitions, those countries fearful of such a perspective, especially Israel, may get no reassurances at all from the increased sanctions. Will they rest quietly while Iran proceeds with the programme? This is why the previous three scenarios, though unlikely, are plausible.

Conclusions

The balance of interests around the Strait of Hormuz can be analyzed from a Games Theory perspective. All players profit from the trade that passes in both senses through this choke-point, and any disruption has a negative impact on all of them; since they all stand to lose, no player changes strategy and the game remains in equilibrium. The sanctions imposed by the NATO members on Iran menace this equilibrium, as they can eventually translate into an effective disruption of the Strait, for the large part closing it to Iran. NATO has chosen this strategy because it now evaluates the equilibrium as having a negative impact: the hypothetical nuclear menace from Iran. In its turn, if the Iranian foreign trade is seriously impacted then further disruption to the Strait stops having a negative impact internally and a strategy change to active disruption becomes profitable because it has negative impacts on other players. NATO has indeed played boldly and it remains to be seen how deep the consequences may be.

For now military action seems a remote hypothesis. Iran still has the ability to keep the Strait open to its ports, in spite of the sanctions. And naturally Iran can always at some point decide to abide by the inspections from the IAEA. From the NATO side military action appears likewise an unlikely scenario, as Iran's prolific military technology seems a deterrent on its own, to which can be added the unpredictable reactions from other major players at the global scale.

If a military conflict ever comes to develop around the Strait of Hormuz on the wake of this new batch of sanctions, it will be a definitive clarification of power over the region. In the three decades following the proclamation of the Carter Doctrine, wars in the region raged for a total of 20 years. NATO imports ever less oil from the Persian Gulf and its economic might has clearly waned during the last decade. Is the Carter Doctrine still affordable these days? Is it even practicable? A military clash at the Strait of Hormuz will certainly answer these questions.